Cash conversion cycle

Cash Conversion Cycle

The time between an expenditure of money to make a product and the collection of accounts receivable from the sale of that product. Obviously, a shorter cash conversion cycle is preferable. A longer cash conversion cycle may indicate a current or potential problem with cash flow.

cash conversion cycle

The time required for a business to turn purchases into cash receipts from customers. A short cycle allows a business to quickly acquire cash that can be used for additional purchases or debt repayment.

The length of cash conversion cycle is used to measure the impact of accounts receivable, inventories and payments to supplier on the firm's profitability, cash conversion cycle assist in measuring the performance and current assets management of the firm's (Uyar, 2009).

1996) examined the relationship between aggressive working capital management and profitability of US firms using Cash Conversion Cycle (CCC) as a measure of working capital management where a shorter CCC represents the aggressiveness of working capital management.

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